Private payment systems, collateral, and interest rates

Charles M. Kahn

Research output: Contribution to journalArticlepeer-review


Recent developments in private payments arrangements, particularly at the wholesale level, (including recent innovations in China) challenge central banks' longstanding monopoly on the provision of the ultimate means of settlement for financial transactions. This paper examines competition between public payments arrangements and private intermediaries, and the effect on central banks' role in monetary policy. Central to the issue is the role of collateral both as a requirement for participation in central bank sponsored payments arrangements and as the backing for private intermediary arrangements. The presence of private systems serves as a check on the ability of a monetary authority to tighten monetary policy.

Original languageEnglish (US)
Pages (from-to)83-114
Number of pages32
JournalAnnals of Finance
Issue number1
StatePublished - Feb 2013


  • Collateral
  • Inside money
  • Monetary policy
  • Payment systems

ASJC Scopus subject areas

  • General Economics, Econometrics and Finance
  • Finance


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